US wealth inequality vs. income inequality

In the US, class divisions are becoming more apparent. While some have to worry about the electric bill, some have money to burn.

We’re talking about the super-rich who make up just one percent of the population. They also own 2/5 of the country’s wealth. That’s according to a study conducted by American economist Edward N. Woolf. Economists define wealth as an abundance of valuable material possessions or resources. To put it simply, wealth, often described as net worth, is the value of one’s assets minus the value of their debts. Woolf has found that, the share of wealth owned by the one percent super-rich is higher than it has been at any point since at least 1962. And that share has risen by nearly three percentage points since 2013. Meanwhile wealth owned by the bottom 90 percent of Americans has declined over the same period. Today, the top one percent of US households is in possession of more wealth than the bottom 90 percent combined. And that gap, which is indicative of income inequality between the ultra-wealthy and everyone else, has only become wider. What is noteworthy is that in an ideal world, the most productive quintile of society would amass roughly three times the wealth of the least productive. And the United States is definitely far from the ideal society.

The upward trend of income inequality in the US shows no signs of reversing. The last time inequality was this high was just before the Great Depression during the 1930s. The most visible indicator of wealth inequality in the US today may be the Forbes magazine list of the nation’s 400 richest. In 1982, the American whose name was at the bottom of the list had a net worth of 80 million dollars. This is while rich Americans in 2016 needed net worth of 1.7 billion dollars to just enter the Forbes 400. The billionaires who make up the Forbes 400 list of richest Americans now have as much wealth as all African-American households, plus 1/3 of America’s Latino population, combined. And such a high level of inequality poses a serious threat to America’s economy. In other countries plagued by income inequality, people from poor households have less access to quality education. That could result in a waste of human talent, a less educated workforce, slower economic growth, and even greater income inequality. The Organization for Economic Cooperation and Development says this leads to 'large amounts of wasted potential and lower social mobility, which directly harms economic growth'. It estimates that inequality has knocked off nearly five percentage points off the economic growth between 2000 and 2015.